2016 (9) TMI 1656 - AT - Income Tax

Disallowance of depreciation - AO treated the business income of the assessee to be income from undisclosed source and accordingly disallowed the claim of depreciation - HELD THAT - As apparent that treating the entire business income as income from other source of the assessee was due to the reason that the assessee could not prove her business of providing video coverage. There is no finding by the Revenue that the assessee did not own any depreciable asset against which she cannot claim depreciation. From the enquiries made by the AO it is apparent that the assessee owned shop and was in the business during the earlier years. Revenue has not been able to point out the source from which the assessee had earned the income which she has declared in her return of income - It cannot be presumed that the assessee was not at all carrying out any business activity during the relevant assessment year with respect to providing the service of video coverage - it is not the case of the Revenue that the assessee did not own any depreciable asset for not allowing the claim of depreciation. Hence, the disallowance made by the learned AO does not seem to be justified. Disallowance of agricultural income - Revenue has rejected the claim of the assessee only on the basis that the assessee has not proved with documentary evidence that she has earned agricultural income - HELD THAT - In normal circumstances for petty farming activity it is difficult or sometimes not practicable to maintain documentary evidence for carrying out agricultural activities. In such situation, though the onus is on the assessee to establish that agricultural activities were carried out, the Revenue should also give some leverage by verifying the facts stated by the assessee before simply disregarding their explanation. In the present case of the assessee, the Revenue has not made any efforts to verify the claim of the assessee. Moreover, since the agricultural income declared by the assessee is quite nominal considering the extent of land holding we are of the considered view that the addition made by the Revenue by treating the agricultural income as income from other source is not warranted. Hence, we hereby direct the AO to treat the amount as agricultural income of the assessee and thereby delete the addition.

Summary

Issues:
1. Disallowance of expenses towards electricity charges & repairs & maintenance
2. Disallowance of depreciation
3. Disallowance of agricultural income

Issue 1: Disallowance of expenses towards electricity charges & repairs & maintenance

The appellant challenged the order disallowing expenses incurred towards electricity charges and repairs & maintenance due to lack of evidence. The first ground was dismissed as the Authorized Representative did not press it during the hearing. The appellant, an individual, had filed her income return declaring income and agricultural income. The Assessing Officer disallowed expenses, including depreciation and agricultural income, leading to the appeal.

Issue 2: Disallowance of depreciation

Regarding the disallowance of depreciation, the appellant claimed receipts from a business but faced challenges in proving the revenue source. The Assessing Officer treated the business income as from an undisclosed source, disallowing depreciation. The Commissioner upheld this decision. However, the Tribunal found that the appellant had shown some evidence of business receipts, concluding that the disallowance of depreciation was unjustified. The Tribunal directed the Assessing Officer to allow the depreciation claim.

Issue 3: Disallowance of agricultural income

The appellant declared agricultural income from two farms, but the Assessing Officer treated it as income from other sources due to lack of evidence. The Commissioner upheld this decision. The Tribunal noted the appellant's substantial land holdings and provided evidence of agricultural income. Considering previous assessments and the reasonable nature of the declared income, the Tribunal concluded that the Revenue had not proven the absence of agricultural activity. The Tribunal directed the Assessing Officer to treat the declared agricultural income as such and delete the addition.

In conclusion, the appeal was partly allowed, with the Tribunal overturning the disallowances of depreciation and agricultural income. The judgment emphasized the importance of considering evidence and circumstances in assessing income sources, particularly in cases of agricultural activities where maintaining detailed documentation may be challenging.